BoC holds rates steady: Sept 2016 rate decision

September 6th, 2016  |  Personal Finance

The Bank of Canada has decided to maintain the target overnight interest rate at 0.5%, making the corresponding Bank Rate 0.75% and the deposit rate 0.25%.

While these interest rates don’t mean much for insurance rates, they do affect the mortgage lending business. Mortgage rates are lower than ever and that’s due to the low key interest rate that lets banks cut the costs of lending. The Bank’s rate cuts have been a measure to help curb the high costs of mortgages as Canada’s housing market grew out of control. However over a year later and prices are higher than ever and a struggling economy has kept the Bank from raising the rate to standard levels.

It’s a sensible decision. After the 2007 housing market crash the United States cut rates to 0% and now, years later they’ve fully recovered. Of course, low rates aren’t the only reason why, but it helped. In Canada the low rates have helped push home sales through the roof and now housing makes up the majority of our economic growth.

According to its press release, the Bank decided to hold rates today because of poor performance in the second quarter, but look toward the end of the year with good expectations.